Financial Accounting Final Answers

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ANSWERS

1 a)

1 b)

1 c)

1 d)

1 e)

1 f) This transaction has no effect on the balance sheet since this is only an order, no financial value.

1 g)

1 h)

1 i)

1 j)

2 a) a]

b]

c]

d]

e]

f]

g]

h]

j]

k]

l]

2 b) INCOME STATEMENT as of April, 30th

Sales Revenue……………………………. $10,000 COGS…………………………………… $(6,500)

GROSS MARGIN………………………..$ 3500

Salary Expense…………………………………..$(1,000) Rent Expense………………………………….. $(2,000) Utilities Expense …………………………….$(200) Depreciation Expense ……………………….$(90)

TOTAL EXPENSES……………………....$ (3290)

Net Income: 3500 – 3290 = $ 210

BALANCE SHEET as of April, 30th

Cash 3,870 Acc / Pay 5,000 A/R 10,000
(Raw Mat 11,800 + Finished Goods1,500) Inv 13,300

Total Current Assets $ 27,170 Total Current Liabilities $ 5,000

(Depreciation $90) PPE (Net) $ 5910 C/S $ 30,000 Prepaid Rent $ 2000 R/E $ 80

Total Non-Current Assets $ 7,910 SHE $ 30,080

A = $ 35,080 = L + E = 30,080 + 5,000 = $ 35,080

|Age |Amount |Estimate to be Uncollectible |Required balance in Allowance| |1-30 Days |$600,000 |%% 0.70% |$4,200 | |31-60 Days |$175,000 |% 1.20% |$2,100 | |61-120 Days |$70,000 |% 11% |$7,700 | |More than 120 Days |$10,000 |% 65% |$6,500 | |Year-end balance of allowance for doubtful accounts     = $20,500 |

3 a)

The credit balance in the allowance for uncollectible accounts is $ 2,500

20,500 – 2,500 = 18,000

3 b) In case of skimming the adjusting journal entry, since it would show expense understated; balance sheet equation would be overstated comparing otherwise. The reason to that is removal of this amount would present the company as if it contains higher receivable accounts.

4 a i) Cost of Goods Available for Sale = AFS = InvB + Purchases = = (3,500x66) + (3400x64.75)+(3,200x64.30) = $ 656,910

COGS (LIFO) = (3,500x66) + (3400x64.75)+(150x64.30) = 231,000 + 220,150 + 9,645 COGS (LIFO) = $ 460,795 InvE = AFS – COGS = 656,910 – 460,795 = $ 196,115 = (3050x64.30)

a ii) Cost of Goods Available for Sale = AFS = $ 656,910

COGS (FIFO) = (3,200x64.30) + (3,400x64.75)+(450x66) = 205,760 + 220,150 + 29,700 COGS (FIFO) = $ 455,610 InvE = AFS – COGS = 656,910 – 455,610 = $ 201,300 = (3050x66)

a iii) Cost of Goods Available for Sale = AFS = $ 656,910 Total Units = 3,200 + 3,400 + 3,500 = 10,100
Total Sold Units = 3,600 + 3,450 = 7,050

COGS (FIFO) = (7,050x65.0405) = COGS (FIFO) = $ 458,536

InvE = AFS – COGS = 656,910 – 458,536 = $ 198,374 = (3050x65.0405)

4 b) They are to use LIFO calculation in order to minimize Taxes. The reason for...
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